Jazz Net Down 14.2 Percent

Jazz reported net income down 14.3 percent to $30.3 million on operating revenue of $396.4 million, which was up 8.8 percent. It received $3.9 million in performance incentives which was up 25.8 percent. Controllable cost per available seat mile dropped 2.6 percent, despite rising fuel and maintenance costs...

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Jazz reported net income down 14.3 percent to $30.3 million on operating revenue of $396.4 million, which was up 8.8 percent. It received $3.9 million in performance incentives which was up 25.8 percent. Controllable cost per available seat mile dropped 2.6 percent, despite rising fuel and maintenance costs. Jazz reported maintenance increases cost $2.1 million while pilot and maintenance training cost $500,000 and passenger inconvenience payments were $400,000. The company expects increased heavy maintenance costs and overtime will abate by the beginning of the third quarter.
"Jazz's performance in the first quarter of 2008 was strong," said Joseph Randell, president and chief executive officer. "Our operational performance this quarter improved significantly over last year, despite some of the most challenging winter weather conditions in eastern Canada. These operational improvements, as reflected in increased incentive revenues, are a clear demonstration of great execution by the entire Jazz team."

Financial Performance - First Quarter 2008
The increase in operating revenue is attributable to an increase of 6.2 percent in the block hours flown and a 20.6 percent increase in pass-through costs. For the three-month period ended March 31, 2008, performance incentives payable by Air Canada to Jazz under the CPA amounted to $3.9 million or 1.7 percent of Jazz's Scheduled Flights Revenue as compared to $3.1 million or 1.4 percent for the same period in 2007. This translates to 71 percent of the incentives available under the CPA for the quarter versus a 57 percent attainment in 2007. Incentives earned in 2008 were higher owing better on-time performance. Year-over-year for the first quarter, other revenue sources increased from $1.9 million to $2.4 million.
Total operating expenses increased from $327.8 million in the first quarter of 2007 to $362.0 million for the same period in 2008, an increase of $34.2 million or 10.4 percent. Pass-through costs under the CPA, represented $26.9 million or 78.9 percent of the total increase in operating costs. Pass-through costs rose mainly as a result of the continuing rise in fuel prices and increased de-icing costs during inclement weather conditions. Controllable costs represented $7.2 million or 21.1 percent of the total increase in operating costs, primarily as a result of salaries, wages and benefits and other expenses.
In addition to the costs for maintenance and pilot training and passenger inconvenience costs, the controllable costs related to the CPA were affected by increased overtime expense related to aircraft heavy maintenance checks on the Jazz fleet by $0.7 million; increased maintenance full time equivalent employees to support the ongoing heavy maintenance requirements for $1.1 million; increased heavy maintenance outsourcing for $0.3 million. In the first quarter of 2008, non-operating expense amounted to $4.1 million, an increase of $3.1 million from the first quarter 2007 attributable to a $3.0 million fair value adjustment related to Asset Backed Commercial Paper.